6 Rules You Should Follow When Lending Money to Family to Avoid Getting Into Financial Problems
Having a weakness for family members and wanting the best for them can cause you to make financial decisions that you will regret later.
A good percentage of the time when you give money to your family, you can count it as lost. This is because it is highly unlikely that you will take court action against a family member in case of failure to honor a debt.
However, as much as it is not a good idea to give loans to your family members, you can lay down some guidelines to use in cases where it is extremely necessary to lend.
Below are some useful guidelines that you can work within to protect yourself from financial problems caused by your family members:
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Learn to say no
Your relative might require you to act as a co-signor for a loan or to assist with getting a credit card. Do not agree to take part in such an activity.
In case the loan goes unpaid, you could end up making payments on your relative’s behalf if he or she fails to repay the loan. If your income cannot accommodate the strain of another loan, this will leave you in a bad debt situation.
If you are in debt as a result of the financial mismanagement of your family member, have a look at national debt relief reviews and sign up for a debt relief program.
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Only lend cash
Limit your transactions to cash only. Dealing in cash will not affect your credit record in case of lack of payment.
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Don’t lend the whole amount
Avoid giving the whole amount that your family member is asking for. Most of the time, people fail to fully exert themselves because they know their family will be their safety net in case they cannot raise enough money to cover their bills.
Don’t allow yourself to be viewed as a safety net. Even if you can come up with the whole amount, only give a fraction of the amount asked.
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Don’t lend if lending will leave you financially exposed
If lending an amount will leave you exposed financially, let your relation know that you do not have any money. It will do you no good to give away your savings or emergency fund, only to end up having to borrow.
There is no guarantee you will get your money back, so resist digging into your savings.
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Ask yourself if you can afford to lose the money
If you don’t get your money back, will you be able to forgive the loan and move on? If you know that the amount will leave too huge an impact if unpaid, decline politely.
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Find out the intended purpose of the loan
When you approach the bank for a loan, you have to disclose the reason for borrowing. You should apply the same standard so that you know if it is safe to lend the money.
By following the above guidelines, you will avoid making costly financial mistakes.
About the Author
Gibbie Trollope is a credit counselor who has a successful record of imparting financial management knowledge to thousands of debtors. Read national debt relief reviews to see some of the services she recommends.
Category: Loans
